Tuesday, 29 March 2016

A war of words has broken out over the government’s
decision to allow five Pakistani counter-terrorism officials, including one
from the Inter-Services Intelligence (ISI) and another from Military
Intelligence (MI) to visit the Pathankot Air Force Base. They are in India to
investigate the fidayeen attack from
January 1-4, when four-to-six terrorists crossed the border from Pakistan,
sneaked into the air base and killed seven Indian military personnel before
getting killed.

The Congress and Aam Aadmi Party (AAP) have
charged the Bharatiya Janata Party (BJP)-led government with endangering
national security by allowing the Pakistani joint investigative team (JIT) into
the base. On Tuesday, as the JIT officials flew from Delhi to Amritsar and then
drove to Pathankot, Congress protestors gathered outside the air base with
black flags and placards reading “Pakistani JIT go back!”

In Delhi, AAP minister, Kapil Mishra,
alleged an “ISI-BJP coalition” and asked: “Why is ISI being served biryani by
Modi?”

Defence Minister Manohar Parrikar had
earlier ruled out allowing the Pakistani JIT inside Pathankot air base.
However, after a political decision to co-opt Islamabad into the investigation,
the Indian Air Force (IAF) is learned to have cleared their entry into the air
base, subject to being allowed to visit only the “non-technical areas” that the
terrorists had breached.

These include areas not directly involved
in flight operations, including airmen accommodation, kitchens and messes,
family quarters, schools, etc. No access will be granted to “technical areas”,
which are directly related to flight operations. These include aircraft hangars
and pens, logistics installations, ammunition dumps, radar centres, air defence
missile batteries and flight control facilities. The terrorists had failed to
breach the “technical areas” during their attack.

Objections to the JIT’s visit centre on two
allegations. First, that the JIT’s visit serves no purpose since Pakistan has
never been serious about investigating terrorist attacks launched from its soil.
Second, that allowing Pakistani officials entry into the air base would give
away sensitive details, compromising operational security.

Ajai Sahni, of the Institute for Conflict
Management says: “Pakistan has never seriously investigated a single terror
attack, including 26/11 (the Mumbai strike of 2008). By hosting the JIT, we will
allow Pakistan to falsely claim that they are doing what is needed. We must
wait until Islamabad satisfies us that it is seriously cracking down on
anti-India jihadis.”

Sahni says Islamabad is yet to do even a
tenth of what Bangladesh has done against terrorists that were targeting India
from its soil. “The burden of proof lies on the country from where terrorists
operate. Dhaka has fully demonstrated its bona fides. Islamabad has not even
begun to”, says Sahni.

Others, like former IAF officer, Air Vice Marshal
(Retired) Manmohan Bahadur, say the Pakistani JIT visit serves no investigative
purpose, but achieves a strategic aim. “If the visit serves to deny Pakistan an
excuse for avoiding action, it serves a strategic aim. Nothing would be lost by
allowing the team to visit”, he says.

Air Chief Marshal SP Tyagi, who has served
at Pathankot as a fighter pilot and later oversaw the base as chief of western
air command points out “there is nothing that a Pakistani visitor to the air
base can see from the ground, which cannot be seen from commercially available
satellite photographs. The IAF has already done a security assessment and I
fully endorse it.”

Tyagi says the IAF has designated areas
where the JIT can go and others where it cannot. “Areas that are at all
sensitive will be physically screened off”, he says.

Tyagi also points out that commercial
flights use about 30 operational IAF bases on a regular basis, without
endangering security. “If scheduled civilian flights and hundreds of passengers
can fly daily in and out of airports as sensitive as Srinagar, what will the
Pakistani team gain from driving through a screened, “non-technical” route in
Pathankot.”

Another former air chief, Fali Major,
endorses Tyagi’s opinion. “In today’s world, software like Google Earth gives
everyone a view into military installations. Military intelligence users can
get high-resolution Russian satellite imagery that is far more useful than a
ground visit”, says Major.

Another expert, who wishes to remain
anonymous, says secrecy exists mainly around communications and radar
frequencies, and combat tactics. “The infrastructure on the ground is pretty
much the same on every combat air base. What needs to be safeguarded is digital
electronic frequencies and codes, and mission tactics. The Pakistanis are
welcome. They will glean none of that”, he says.

On Monday, the Defence Procurement
Procedure of 2016 (DPP-2016) was finally released, except for a still-disputed chapter
on choosing “strategic partners” from the private sector, which would be granted
monopolies for manufacturing complex weapons platforms like ships, aircraft and
tanks. These monopolies would be identical to those that defence public sector
undertakings (DPSUs) have long enjoyed. Clearly, now, a private sector monopoly
is superior to a public sector one.

This ill-conceived notion of private sector
“strategic partners” originates from the Dhirendra Singh Committee, which the
National Democratic Alliance government constituted in 2014 to shoehorn Prime
Minister Narendra Modi’s “Make in India” slogan into a new DPP. The Dhirendra
Singh Committee, consisting of defence ministry mastodons, past and present, chose
not to throw open the doors to competition, opting instead for governmental
discretion, ignoring the lessons of the spectrum and coal allocation fiascos
where market forces were abandoned in favour of the government’s discretionary
largesse. In the self-procreating manner of government committees, this led to another
committee --- designated a Task Force, under former Defence R&D
Organisation (DRDO) chief, VK Aatre --- to specify the criteria for selecting private
sector companies as “strategic partners” in six technology areas:
aircraft/helicopters, warships/submarines, armoured vehicles, missiles, command
& control systems, and critical materials. While the Aatre Task Force
recommendations remain nominally classified, this newspaper has already reported
that it divided the technology areas into two groups. Each of the seven
technology areas in Group 1 --- aircraft; helicopters; aero engines;
submarines; warships; guns and artillery; and armoured vehicles --- would have
one designated strategic partner. Meanwhile, two strategic partners would be
chosen for each of the three technology segments in Group 2 --- metallic
material and alloys; non-metallic materials; and ammunition, including smart
munitions.

All this effort would be going not into
selecting “strategic partners” for designing or developing high-tech weaponry
for India. These would be mere production agencies that manufactured equipment to
blueprints bought under the “Buy & Make” category of procurement. Earlier,
the ministry would have nominated a DPSU to build the product under licence;
now a private sector “strategic partner” would build it.

In parallel, the design and development of defence
equipment in India would take place in the “Make” category, which would see
open competition between private and public sector companies, culminating in
the selection of two “development agencies” (DAs). Under DPP-2016, the defence
ministry will subsidise 90 per cent of the DA’s development costs, and assure
the DA of the lion’s share of the production order. It is unclear whether
companies participating in “Make” development projects can simultaneously be
chosen as “strategic partners” for manufacturing equipment in “Buy & Make” projects.
However, the Aatre Task Force mandates, inexplicably, that a company can be
chosen as a strategic partner in no more than one technology area. Predictably,
this is being strongly contested by private corporations like Larsen &
Toubro and the Tata Group, which have built multi-disciplinary capabilities.
They say their capability to build a warship should not be a disqualification
in building a tank.

Meanwhile, it remains unclear why the
excellent option of selecting private sector companies as Raksha Utpadan Ratnas
(RuRs) continues to gather dust. This option, which flowed out of the Vijay
Kelkar Committee report in the mid-2000s, requires the defence ministry to
select private sector companies as RuRs, based on their financial,
technological and infrastructural strengths. These RuRs, which would have the
same status as DPSUs, would be eligible to compete for defence ministry
contracts to design, develop and manufacture complex weapons systems for the
military. The RuR option allowed the ministry adequate assurance of the
technological competence and financial strength of defence company aspirants,
while also introducing competition into defence contracting. These fully vetted
Indian companies could be relied upon to support products through their service
lives, providing maintenance, spares, overhaul and upgrade, which add up over
decades to 4-10 times the cost of acquisition.

It remains unclear why the defence ministry
is bypassing the free market, and opting for governmental judgment. True, all governments
tightly control defence industries, since these are national strategic assets. Yet,
every defence economist agrees that market forces enhance efficiency and lower
costs. Successive Indian governments, however, have remained woolly-headed
about their role vis-à-vis defence industry.

A defence ministry’s first role is to keep
defence industrial policy ahead of evolving trends in the global defence
industry. Mr Modi’s “Make in India” policy, which aims at creating large numbers
of low-to-medium-skill defence production jobs, is out of synch with global
trends. Paradigm changes under way in manufacturing technology are already
seeing low-wage assembly lines being replaced by robotic manufacture, in which
computerised machines churn out products faster, cheaper and more precisely
than low-wage labour. Germany, a technology hub for robotic manufacturing,
refers to this as Industry 4.0. The impact of this is being felt in America,
which is experiencing resurgence of manufacture, but without job growth. As the
icing on the cake for defence corporations, robotic manufacture and 3-D
printing are giving managers major advantages in dealing with labour unions.
The foundational logic of “Make in India” is already sinking.

The defence ministry, therefore, must focus
on creating white-collar jobs through a “Create in India” policy; in which Indian
entities do systems engineering, rather than mere systems integration, in which
largely foreign components, sub-systems and systems are assembled in India into
what remains essentially a foreign weapons platform. For example in the
Futuristic Infantry Combat Vehicle (FICV) project that is now underway, the
defence ministry has defined roles so loosely that Indian vendors can “front”
for global giants like, say, General Dynamics or BAE Systems, with whom
technology partnerships exist. An “Indian” consortium can adopt an existing
FICV, engineering it at the periphery to conform to Indian requirements.
However, this would remain a foreign platform on Indian soil, no different from
the Russian T-series tanks that were designed for colder climes and different
operational doctrines.

Instead of wasting policy mind space on
monopolistic “strategic partnership” models that are directed towards
blue-collar jobs whose future is uncertain, the defence ministry should focus
on creating white-collar, high value-add “Create in India” jobs. A key element
of this is to provide the private sector with incentives and subsidies for
research and development, and access to low cost capital that is available to
overseas defence companies. This would raise technology levels, generate higher
salaries, and create truly Indian platforms that can be supported through their
service lives without large additional expenditures for each level of overhaul
and upgrade.

Sunday, 27 March 2016

Given the number of well-informed military experts who visit this blog, may I tap into the bank of their wisdom.

We have all heard about the "Strategic Partnership" model mooted by the Ministry of Defence (MoD). The Aatre Committee has submitted recommendations (see my article in January) for choosing one private companies in each of seven "strategic segments" --- aircraft; helicopters; aero engines; submarines; warships; guns and artillery; and armoured vehicles --- and two private companies for each of three other segments --- metallic material and alloys; non-metallic materials; and ammunition, including smart munitions --- who will be the MoD's "preferred partners" for manufacturing in India, based on foreign ToT.

The committee has also laid down eligibility norms for being chosen as a "strategic partner".

My question is: does the "strategic partner" model merely replace a public sector monopoly with a private sector one? Should the MoD leave it to market forces to choose the Indian partner, rather than forcing a pre-nominated "strategic partner" on the foreign vendor?

Would it be wiser to narrow down the field by specifying eligibility norms for private companies, along the lines of the Raksha Utpadan Ratna (RuR model) that had been mooted between 2005-2007?

Thursday, 24 March 2016

MoD says will increase
indigenous sourcing from 40 per cent today, to 60 per cent in five years

By
Ajai Shukla

Business Standard, 24th March 16

Even as the Defence Exhibitions
Organisation (DEO) scrambles to patch together a new location in Goa and access
roads for Defence Exposition 2016 (Defexpo 2016) --- the first one to be held
outside Delhi --- enormous interest in the Indian arms bazaar will bring 1,030
Indian and international defence companies to India’s premier defence
exhibition that kicks off on March 28.

Not even a local political movement that is
protesting the land use and environmental effects of shifting Defexpo 2016 to
Quepem Taluka of South Goa has dampened interest from the United States (93
companies), Russia (71), UK (46), Germany (39), France (38), Israel (38) and
other arms producers like South Korea and Italy.

“More than 47 countries will participate in
Defexpo 2016. For the first time, we will be holding live demonstrations of
equipment, which was a constraint in Delhi”, said AK Gupta, Secretary Defence
Production, on Wednesday.

Defexpo’s future location will depend
upon how this exhibition goes off. Asked in writing by Business Standard
whether subsequent Defexpos would also be held in Goa, the defence ministry
responded: “No final decision has been taken on permanent venue of Defexpo.
Future course of action will be based on the experience of the Expo in 2016 and
the view of the Government of Goa.”

Gupta indicated the success of Defexpo 2016
would not be gauged by the contracts signed, but by how effectively it would
provide a business-to-business forum for Indian and foreign companies to tie up
partnerships to benefit from the “Make in India” policy.

On Monday, Defence Minister Manohar
Parrikar had cleared the new Defence Procurement Policy of 2016. Not
coincidentally, DPP-2016 will be available on the defence ministry website on
March 28, the day Defexpo 2016 will be inaugurated.

Underlining the new commitment to “Make in
India”, Gupta stated that 90 per cent of the procurement approvals by the
National Democratic Alliance government had been accorded under the “Buy
Indian” and “Buy & Make (Indian)” procurement categories. He said
DPP-2016’s new category of “Indian Designed, Developed and Manufactured”
equipment would further add to indigenous production.

Interestingly, Gupta provided the first
official assessment of the real foreign content of India’s total defence
procurement, which he put at 60 per cent. “We do 60-65 per cent of our
procurement from domestic companies. If you take out the foreign content that
these companies put in and work out the indigenous content, it comes to about
40 per cent,” Gupta estimated.

He also laid down a target of 60 per cent
indigenisation in the next five years, a target that most defence industry
analysts consider unrealistic.

Amongst the 1,030 companies participating
will be controversial Italian company, Finmeccanica, which is the holding
company for AgustaWestland, the helicopter maker whose contract for AW-101
helicopters was cancelled by the defence ministry after Italian prosecutors
began investigating charges of bribery of Indian officials to get the AW-101
contract.

In the last Defexpo 2014, Finmeccanica had
been asked to stay away, with then defence minister AK Antony wary of the cloud
over it. Now, with a more liberal “blacklisting policy” being evolved,
Finmeccanica is back in the limelight.

However, Gupta confirmed that two other
blacklisted companies --- Rheinmetall Air Defence and Singapore Technology
Kinetic --- would not be participating.

He also confirmed that Pakistan would not
be amongst the 47 countries participating, as it had not been sent an
invitation. China had been invited to send an official delegation, but has not
responded.

Resentment stems from the
widespread belief that civilian officials are whittling away at the military's relative
status

By Ajai Shukla

Business Standard, 24th March 16

The Seventh Central Pay Commission recommendations,
handed over to the government in November, have aroused bitter resentment
within the military. On March 11, the three service chiefs made a presentation
to the “Empowered Committee of Secretaries”, a 13-member panel headed by the
cabinet secretary, which is looking into the recommendations. The army, navy
and air force are waiting to see if this panel will tone down clauses that
former army chief, General VP Malik, has termed “a killer for the military.”

This impression is rampant amongst soldiers,
sailors and airmen even though the Seventh Pay Commission has raised baseline
military salaries by about 15 per cent, taking the pay of a lieutenant (the
entry grade for officers) to Rs 56,100 per month; and that of a sepoy (the
entry grade for ratings) to Rs 21,700 per month. This is significantly lower
than the 40 per cent hikes handed out by the Fifth and Sixth Pay Commissions.
One of the Seventh Pay Commission members, Rathin Roy, underlining the imperative
to curb government spending, has admitted unapologetically: “We are the
stingiest pay commission, ever.”

In addition to pay, soldiers get a special
allowance called “military service pay”, which exists in most militaries in
forms such as the British army’s “X-Factor Pay”. The Seventh Pay Commission raises
it for officers from Rs 6,000 to Rs 15,500 per month; and for persons below
officer rank from Rs 2,000 to Rs 5,200 per month.

In addition, soldiers get a “risk and
hardship allowance”, based on the profile allocated to every military station.
The highest grade on the matrix is Rs 25,000 per month, but serving on the
Siachen Glacier and Antarctica entitles a soldier to a special grade of Rs
31,500 per month.

Totting up these allowances, the Seventh
Pay Commission chairman, Justice Ashok Kumar Mathur, in an interview to The
Economic Times on December 20, claimed he had recommended 30 per cent higher
salaries for the military than civilian services would draw.

His logic was based on the dubious premise
that military service pay constitutes a component of salary. In western
military salary structures, such allowances are not salary, but compensation
for the “intangible hardships” of military service. These include long
separation from families, wives being unable to work, and children changing
schools frequently and growing up without their fathers, et cetera.

During its deliberations, the Seventh Pay
Commission commissioned a study by the Institute for Defence Studies and
Analyses (IDSA), which compared military salaries in India with those of major
foreign armed forces. While the IDSA study was relatively unbiased, the Seventh
Pay Commission chose to interpret them selectively, applying purchasing power
parity (PPP) to boost the value of Indian military salaries; and then comparing
them with the per capita income of the concerned country. Given India’s abysmal
per capital income, military salaries look good by comparison. The Seventh Pay
Commission uses this to argue that India’s military is paid very well by
international standards.

It’s
the comparison, stupid!

Since the hefty raises of the Fifth and
Sixth Pay Commissions, few soldiers claim they are poorly paid. Even so,
festering resentment stems from the widespread belief that civilian officials,
particularly from the Indian Administrative Service (IAS) conspire to whittle
away the military’s relative status. Soldiers point to a host of generous
allowances, and assured promotion benefits that are triggered for entire civilian
batches as a result of the first officer of that batch getting promoted. A key element
of this was instituted by the Sixth Pay Commission through a mechanism called
“non-functional financial upgrade”. This mandates that when an IAS officer from
a particular batch (everyone who joins service in a particular year) is promoted
to a certain rank, all his batchmates from some sixty Group ‘A’ central
services also start drawing the higher pay scale two years later, irrespective
of competence or vacancies in that rank. The military had taken up a case for a
similar upgrade, but this was not agreed to. The Seventh Pay Commission does
not recommend its extension to the military either.

Thus, while practically every civilian central
service officer would make it to the top pay grades, the army will remain a
sharply pyramidal meritocracy, where less than one per cent of officers are
promoted to lieutenant general rank (higher administrative grade, in pay
commission scales). Those soldiers who do not make the cut --- including
meritorious officers, who are held back only because of limited promotion
vacancies at each rank --- are entitled to neither the power nor the pelf of
higher rank since the army has no non-functional financial upgrade. The
military’s demand for parity has been one of the five “core anomalies” of the Sixth
Pay Commission; and was strongly pressed before the “Empowered Committee” last
week.

Cost-to-company

Adding to the bitterness amongst soldiers
is the argument, increasingly voiced by civil service officers, that soldiers’
emoluments should be evaluated in terms of “cost-to-company”, taking into
account all their emoluments and facilities. Top generals argue that the armed
forces constitute “the cheapest gun fodder”, since they incur the least
lifetime cost to the government. They point out that soldiers incur the lowest
induction cost, since they do not get paid salary during their training period,
unlike civilian officials and Central Armed Police Forces. They have the lowest
retention cost, since they retire early, thus drawing salaries for less time
than civilian counterparts; and they also have the lowest advancement cost,
since relatively small numbers are promoted to higher rank, leaving many
languishing at lower pay grades. Finally, soldiers also incur the lowest
pension costs, since their pensions are fixed at 50 per cent of the last pay
drawn --- at lower pay grades in most cases.

The army has slowly --- and sullenly ---
come to terms with the “first amongst equals” status of the IAS, which has been
inexorably institutionalised since the Third Pay Commission noted that “an IAS
officer gets an unequalled opportunity of living and working among the people,
participating in planning and implementation of developmental programmes,
working with the Panchayati Raj institutions, coordinating the activities of
government departments in the district and dealing directly with problems of
law and order.” Given this, the Third Pay Commission granted the IAS (and the Indian
Foreign Service) three extra increments at each of three successive seniority
grades --- “senior time scale”, “junior administrative grade” and “selection
grade”, to which IAS officers are promoted at four, nine and 13 years of
service respectively. Since the other services got just one increment at these
grades, IAS/IFS officers accumulate six extra increments by the time they
served 13 years. This lead in emoluments continued through their service.

However, successive governments have
ensured the military remains the “first amongst uniformed services.” The Seventh
Pay Commission now upsets this balance by recommending that: “the criticality
of functions at the district administration level holds good equally for the
IAS, Indian Police Service (IPS) as well as the Indian Forest Service (IFoS).”
It recommends that six additional increments be extended also to the IPS and
IFoS.

The military chiefs have argued strongly
before the “Empowered Committee” that the military --- which they term “the
instrument of last resort” --- does not have the option of “handing over an
adverse situation to any other government agency”. They have argued that, while
police and CAPF personnel often lay down their lives, including in cross border
firing, they incur a “lower level of risk” compared with the armed forces,
which “actively seek encounters with terrorists and close combat with the
enemy, despite the high risk of death”. The chiefs have argued that military
service demands higher levels of proficiency, commitment and sense of
sacrifice.

There is little to suggest, however, that
the government is listening. The anomalies of the Sixth Pay Commission still
remain unresolved --- including five “core anomalies” that include the military’s
demand for non-functional financial upgrade. A committee of secretaries that
was constituted in 2011 heard the military for a month and then tossed the ball
into the lap of the Seventh Pay Commission. There is little to suggest the
military’s current representations would be treated with greater sensitivity.

Comparative chart of benefits

Benefit

All India Services/ Central Police
Forces

Defence personnel

Remarks

Increments

3 increments for 3 promotions up to 13 years service for
All India Services

Variable, up to 6 increments for DRDO personnel

Only one increment for each of these 3 promotions, which places
military personnel six increments behind AIS/CAPF

Similar increment structure demanded for military
personnel as for All India Services

Non-functional
financial upgrade (NFFU)

When the first IAS officer of a batch gets promoted, his
batchmates in Grade “A” Central Services start drawing the salary of that
higher rank 2 years later. This is termed NFFU.

Military officers have a stringent selection procedure
for colonel rank and above, with no NFFU benefits. Just 1% of military
officer draw pay of Hr Administrative Grade (HAG).

7th CPC is divided on NFFU. One member says
the military deserves NFFU. Another recommends doing away with NFFU, leaving IAS
lead intact.